Categories: Budgeting, Financial Planning, General Tips
Congrats on landing your first job! Whether it’s a part-time gig or you’re in the early stages of starting a career, this is a major milestone to celebrate and begin to build financial stability and independence. Here are a few helpful financial tips to keep in mind as you begin to work:
When you look at your paycheck for the first time, the larger (gross) number is your total compensation for the work you have done during that pay period. The final amount on your check (net) is what you get to take home after pre-tax deductions and taxes are taken out.
All employee wages are subject to federal income tax, and often Social Security and Medicare taxes (even if you are not using these services yet). Pre-tax deductions can lower the amount of taxable income you have, and many can help to pay for other things like healthcare and retirement savings. The amount you elect to put toward a 401(k) or retirement account, and what you pay through your paycheck if you opt to join the company’s healthcare plan, will be considered pre-tax deductions and will not be included in the amount that gets taxed from your wages.
Direct Deposit to your Checking Account
The most convenient way to get paid is to have your paycheck directly deposited into a checking account. The money is sent into your account electronically each pay period, and is available to you immediately (rather than having to go somewhere to cash a paper check or waiting for a mobile check deposit to clear). Here’s some information on how to get started with your own account.
Develop a Debt Plan
It is never too early to plan for how to pay off debt—even before you have it. Your student loans might be coming due or you might want to apply for a loan to buy a car so it’s a good idea to plan for how you will pay off this debt. That may mean enrolling in autopayments, mapping out a payment calendar, or calculating the total time needed to pay off the loan plus the interest that builds over time. The sooner you map out a strategy, the sooner you’ll pay off the loan and be debt-free.
Save, Save, Save Money
Making short-term and long-term savings plans is essential for building financial security. Depending on your personal goals, for example going to college, buying your own home, or traveling on a regular basis, saving money is key to achieving your goals. Short-term savings plans may simply mean setting aside a specific amount of each paycheck toward a savings account—or better yet sending that amount directly to your savings account during the direct deposit process (you can opt to split between accounts when you sign up for direct deposit with your employer). Longer term planning may include having an idea of the amount of money you would like to have saved each year, or striving to achieve a set amount of savings by a certain age or date. You can also decide that any “extra” money you get will go into savings, whether that be birthday gifts, a tax refund, or possible work bonus.
Early financial planning can really pay off—literally—as you take on each stage of life. Young adults who take small steps toward financial stability at an early age can see huge benefits in the moment and down the road. Get started today by opening a checking account, or exploring other ways to plan for your financial future.